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Big banks can win on price, but small banks say commercial lending is too attractive to give up on. Some community bankers are hunting for customers that bigger banks might discount and for loan officers displaced by M&A.
November 22
What banks would do for a crystal ball these days.
Uncertainty surrounding the economy, the election and other concerns are keeping some potential borrowers "on the sideline," Beth Mooney, the chairman and chief executive at KeyCorp (KEY) said Monday.
"If I could characterize what we're hearing from our clients — I've always said they are cautiously optimistic, and I think I would at this point say cautiously optimistic has become just more cautious," Mooney told participants at an investor conference in New York hosted by Barclays.
"One client characterized it: 'There is no real incentive to make a big decision to acquire any leverage, acquire a plant, do something that puts you out on the risk curve. It's easier for right now to hold steady because it just is such an uncertain environment,'" she added.
Specific concerns run the gamut: "The uncertainty around the election, uncertainty around tax policies, our own fiscal cliff that's coming at the end of this year, the events in Europe -- make your list," she said.
Mooney said that while the bank anticipates loan growth in the third quarter, thanks to continued strength in commercial and home equity loans, it is likely to be "moderated."
Her comments followed earlier remarks at the conference by M&T Bank's (MTB) Chief Financial Officer Rene Jones, who said that a recent bank survey of commercial borrowers suggested "they are actually more cautious." Bank of America (BAC) Chief Financial Officer Bruce Thompson agreed that demand "is relatively slow," though he said in his presentation that larger banks are in position to capture more corporate business as European banks continue to scale back their lending.
Among other issues, Mooney also discussed the bank's plans for growing its credit card portfolio, which it
"That is an attractive mix of higher yielding assets than we currently have on our balance sheet," she said.
The Cleveland bank joins a growing number of regional banks that have bought back credit card portfolios to increase revenue, including Regions Financial (RF) in Birmingham, Ala., and Sovereign Bank in Boston.
The $725 million portfolio includes roughly 400,000 consumer and business accounts of current and former Key customers, the bank has said. More than half of the cards are mass market, 30% are mass affluent, 8% are business and 6% are private banking, according to slides that accompanied KeyCorp's presentation on Monday.
Mooney said that the bank hopes to grow the number of customers using a KeyCorp credit card. She noted that currently the bank has about a 12% penetration rate with customers in credit cards compared to almost 70% in debit cards.
"So as we can remix and put that into our relationship rewards account, for example, that creates fee income opportunities," she added.
Matthew Monks and Alan Kline contributed to this story.
